- Maintain HOLD on PPB Group Bhd, with an unchanged fair value
of RM13.15/share. Our fair value of RM13.15/share is based on a PE of 16x on
FY13F EPS.
- In the past seven years, PPB Group’s PE ranged from a low
of 8.7x to a high of 26.1x. Average PE was at 16.4x.
- PPB’s 18%-owned associate, Wilmar International, is currently
trading at an FY13F PE of 13.6x versus PPB’s 14.9x.
- PPB’s FY12 results were above our forecast and consensus
estimates due to Wilmar’s strong net profit in 4QFY12.
- On a YoY basis, PPB’s net profit fell by 14.1% to RM842.2mil
in FY12 as share of profits in associate declined 12.5% to RM712.5mil.
- Excluding Wilmar, PPB’s EBIT was let down by lower contributions
from the grains trading and flour, and cinema divisions.
- The grains trading and flour division was affected by unfavourable
grains trading position, which suffered a loss of RM13.6mil in FY12. After a
fair value loss in 3QFY12, the loss swung into a gain of RM27.6mil in 4QFY12.
- Using low protein soft red wheat as a gauge, wheat price shrank
roughly 4.6% from an average of US$8.34 15/16/bushel in FY11 to US$7.96
3/8/bushel in FY12.
- On a quarterly basis, wheat price eased 2.4% QoQ to US$8.64
15/16/bushel in 4QFY12.
- Losses at the chemicals, livestock, investments and other operations
division declined from RM5mil in 3QFY12 to RM2.4mil in 4QFY12. We believe that
this was partly due to a 2-sen increase in the selling price of chicken eggs.
The hike in selling price took place at end-October 2012.
- The division was also boosted by positive performance from
the bread sub-division.
- Massimo bread sub-division has broken-even after a mere 1½
years of operations. This is in spite of the bread products still being sold at
their promotional prices.
- However on a yearly basis, the chemicals, livestock, investments
and other operations recorded a loss of RM15.8mil in FY12 versus a profit of
RM12.3mil in FY11.
Source: AmeSecurities
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